Tag: Gini Coefficient

After crafting the initial features of the post-crisis bank-regulatory framework, global and U.S. policy-makers were dumbfounded to discover that costly new rules changed the competitive financial-market balance. Mirabile dictu, when costs rose for banks, banks changed their business model to cling to as much investor return as possible instead of, as regulators apparently expected, taking it on the chin to ensure ongoing financial-service delivery at whatever pittance of a profit remained. As markets rapidly and in some cases radically redefined themselves, global regulators dubbed the beneficiaries of this new competitive landscape “shadow banks.” At themost recent meeting of the FSB Plenary, they changed shadow banks to the less stealthy moniker of “non-bank financial intermediaries.” A newBIS working papershortens the scope of shadow banking to “market-based finance,” going on to assess a fundamental question: does the transformation of financial intermediation from banks to non-banks alter the income and equality landscape? The answer: It’s complicated.Continue reading “This Little Equality Goes to Market”→

Although the Federal Reserve resolutely rebuffs suggestions – mine included – that it’s exacerbated U.S. economic inequality, the Bank of England has been forced by public outcry to deal directly with its own inequality impact. Reacting to strong public protest and withering fire from the Prime Minister, the BoE recently released not only a report denying the charges itself, but now also an exculpatory speech by Andrew Haldane, its influential chief economist. Clearly feeling the heat, the Bank of England has even come up with a way to sell its positive message: personalized “scorecards” proving to the skeptical citizenry that it’s better off than personal economic problems might lead it to believe. Continue reading “Baseball Cards for the Equality Game?”→

When the IMF was established at Bretton Woods in 1945, it was key to the post-war creation of a globalized international economic and financial system. That was then. Now, the Fund has released aground-breaking paperfinding that globalization not only does not boost growth in advanced economies, but also appears to worsen income inequality. The paper does not go on to push for protectionism – blasphemy at the Fund and not borne out for trade in goods by the detailed findings of this study. It does, though, show that the more globalized capital flows grow in concert with more imports, the harder it is for low-skilled workers to get ahead. No wonder the Rust Belt’s as angry as it said it was in 2016. Continue reading “Wondering Why Trump Loves Tariffs? Check Out Globalization’s Inequality Impact”→

Does economic inequality lead to political polarization that then creates gridlock that increases economic inequality and turns negative feedback intoM.C. Escher’s tessellated stairwayto a political doom loop?

After the first full year of Donald Trump and a GOP-controlled Congress, it’s easy to conclude that we’re in the part of the cycle where inequality leads to polarization and then to gridlock broken only by anti-distributive policies and more acute polarization before gridlock sets in again. Getting a really bad feeling, I turned to a review of academic literature on economic inequality and political polarization. It generally confuses causality and correlation, but nonetheless shows that conventional wisdom is right: all of these forces make this a particularly parlous political session with potentially dangerous consequences for long-term comity and even stability. Put another way, 2018 will be way ugly. Continue reading “The Mother of All Negative Feedback Loops: Economic Inequality, Political Polarization, and the 2018 Congress”→

While much of the inequality debate focuses on the gains of “the 1%,” less attention has been paid to the economic well-being of what is broadly termed the middle class, which is all too often just lumped into the other “99%.” However, focusing the debate on only the 1% obscures important trends within each of these groups, including that there is ample evidence that the gains of the 1% are largely driven by the wealthiest among this already-elite group along with diminishing prospects for the rest of us. Today, we look at one of these groups with diminishing prospects and a concerning trend recently highlighted by IMF staff: the “hollowing out” of the U.S. middle class. Continue reading “The Morass That Swallowed the Middle Class”→